Do life events hold the key to pension engagement?

How much will our monthly mortgage repayments be? How much will that leave us for other expenses? With finances at the front of our minds, would a letter about our pension make us stop and act now?

Or would the many extra tasks involved with moving house leave us with very little spare time to think about a long-term goal over a short-term priority? 

Researchers have identified a number of life events that could create a range of reasons to think about our finances and the future, and in turn lead to a ‘teachable moment’.

To find out more, we worked with Maastricht University to carry out a series of in-depth interviews with industry experts and pension savers, as well as an online questionnaire completed by Nest members.

So what did we find? Engaged savers confirmed that certain life events had made them think more about the future and their finances, and in some cases had prompted them to increase their pension contributions or switch funds. In particular, starting a new job, becoming a parent and buying a house were said to have had the strongest effect. 

These were encouraging findings, but as we dug deeper we found reasons to doubt them. When we conducted the same research with a group of passive savers, the findings revealed that they had also experienced the same life events and in some cases more frequently than the engaged savers. 

So why did certain life events supposedly trigger engagement from some savers but not others? It could be that there is another variable at play. The two research groups differed by age and gender, so it could be that one of these characteristics impacted the effect of the life event. 

The effect of any life event can be complex. They can increase mental and emotional load and encourage short-term focus on urgent needs rather than on long-term planning and pensions.

On a practical level, if life events do make us more receptive, how could pension providers use these ‘teachable moments’ to engage savers? One of the main challenges would be detecting the life event with enough accuracy to effectively time the delivery of tailored communications.

UK schemes often do not know much more than a saver’s date of birth, address and income. And some life events, like marriage, divorce and childbirth, are harder to identify or can only be detected after the event has taken place.

In these circumstances, ‘big data’ could provide a solution. But would savers be appreciative of a tailored communication during their life event or concerned that ‘big brother’ is watching them? 

Do life events hold the key to pension engagement? We need to look more closely at their impact, the reactions they trigger and their relation to pension and long-term planning behaviours. While this research suggests there may well be a link, this new evidence is one more piece of a larger puzzle.

Matthew Blakstad is head of Nest Insight research